U.S. economy grew at 2.5 percent rate in spring

8/29/2013

ASSOCIATED PRESS

Jeff Caldwell, 29, right, a chassis assembly line supervisor, checks a vehicle on the assembly line at the Chrysler Jefferson North Assembly plant in Detroit

WASHINGTON — The U.S. economy grew at a 2.5 percent annual rate from April through June, much faster than previously estimated. The steep revision was largely because U.S. companies exported more goods and imports declined.

The Commerce Department said second-quarter growth was sharply higher than the initial 1.7 percent rate it reported last month. And the growth this spring was more than double the 1.1 percent rate from January through March.

The improvement in the trade deficit helped offset a weaker government spending.

Economists expect growth will stay at an annual rate of around 2.5 percent in the second half of the year, helped by steady job gains and less drag from federal spending cuts. Still, some say higher interest rates might restrain the economy’s expansion in the second half.

The government’s estimates of economic expansion measure changes in the gross domestic product, the broadest gauge of the economy. GDP measures the output of all goods and services produced in the United States.

The revision was made after the trade deficit narrowed sharply in June — information that wasn’t available to government analysts produced their first estimate for second-quarter growth. The additional information left trade neutral in the second quarter, instead of subtracting 0.8 percentage points from growth.

Government spending shrank an annual rate of 0.9 percent in the second quarter, much worse than the 0.4 percent drop initially estimated. Spending by the federal government shrank at a 1.6 percent annual rate. State and local governments cut at a 0.5 percent rate.

Two key areas of the economy — housing and business investment — remained strong in the revision to second-quarter growth. Housing construction grew at an annual rate of 12.9 percent, the fourth consecutive quarter of double-digit growth. Business investment on structures was revised up to at 16.1 percent rate, although spending on equipment was revised a bit lower.

Consumer spending, which accounts for 70 percent of economic activity, grew by a 1.8 percent rate in the second quarter. That’s unchanged from the initial estimate but down from a 2.3 percent growth rate in the first quarter.

Many economists said a key signal of the economy’s health in the second half of 2013 will come from Friday’s report on consumer spending in July. Consumer spending held up in June. But rising interest rates might have caused it to slow in July.

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